King Dollar Crushes Yen as Aggressive Fed Bets Rise

By Kevin Buckland and Tom Westbrook

TOKYO (Reuters) – The dollar hit a 24-year high against the yen on Wednesday after U.S. economic data bolstered the view that the Federal Reserve will continue aggressive policy tightening.

The Chinese yuan fell to a two-year low, approaching the psychologically important 7 per dollar mark despite the authorities’ measures to stem its decline. The Philippine peso fell to a record low.

The euro languished not far from Tuesday’s two-decade low, well below parity, as European Union ministers prepare to meet on Friday to discuss the energy crisis hammering industry and presses households.

An overnight report showed that the U.S. services industry unexpectedly rebounded last month, bolstering the view that the economy is not in recession and giving the Fed leeway for another 75 basis point rate hike on September 21.

The markets are currently giving this scenario a 75% probability, with a 25% probability for a half-point upside.

The dollar climbed to 144.38 yen for the first time since August 1998. The Japanese currency is extremely sensitive to movements in long-term US rates, and the yield on the 10-year Treasury note climbed to 3.365 % in Tokyo trade, a level not seen since June 16.

Japan’s top government spokesman, Chief Cabinet Secretary Hirokazu Matsuno, told a press conference that the administration would like to take necessary action if the “swift and one-sided” moves in currency markets continue. continue, reinforcing the rhetoric to describe the month of almost 9% of the yen. – long decline.

Earlier in the day, Japanese Finance Minister Shunichi Suzuki was quoted in the same language by the Jiji news agency.

“The rate at which the dollar is appreciating against the yen is spiraling out of control and risks becoming unanchored,” said Davis Hall, head of capital markets at Indosuez Wealth Management Asia.

“Right now you’re luring everyone to stop by throwing in the towel,” he said. “We could reach 148 without the action of the MOF (Ministry of Finance)”.

However, many analysts view intervention as difficult with the momentum behind the yen’s decline against the dollar driven by a growing divergence in monetary policy. Unilateral action would be even less effective, they say.

“Foreign central banks prioritize inflation management and cannot afford to worry about exchange rate fluctuations,” said Rikiya Takebe, senior strategist at Okasan Securities.

“Monetary intervention or policy revisions by the Bank of Japan will likely be difficult, and it will not be easy to keep the yen from falling.”

The dollar will remain a force to be reckoned with through the rest of this year and into next as U.S. interest rates rise and the economy outperforms its peers, currency strategists say in a Reuters poll.

The euro wallowed below 99 cents, after falling to $0.9864 overnight.

The European Central Bank is expected to offer a 75 basis point rate hike on Thursday, but traders seem more focused on Russia’s decision to keep the Nord Stream 1 gas pipeline closed indefinitely.

The pound lost 0.32% to $1.1480, edging closer to the 2 1/2-year low of $1.1444 hit on Monday as Britain was also embroiled in the energy crisis, despite plans by the UK. new Prime Minister Liz Truss for a massive support package.

The U.S. dollar index, which measures the greenback against six major peers, hit a new 20-year high at 110.69.

The onshore yuan weakened to a low of 6.9808, the weakest level since August 2020, even after the central bank continued to set the currency’s official guidance firmer than market forecasts. Disappointing trade data from China further rattled sentiment.

The Philippine peso fell to a record high of 57.32 to the dollar.

The New Zealand dollar fell to the lowest since May 2020 at $0.5997, and the Singapore dollar fell to the lowest since June 2020 at 1.4107 per greenback.

The cryptocurrency bitcoin fell to its lowest since June 19 at $18,540, extending a 5% slide from Tuesday.

(Reporting by Kevin Buckland and Tom Westbrook; Additional reporting by Daiki Iga; Editing by Ana Nicolaci da Costa and Kim Coghill)

Copyright 2022 Thomson Reuters.

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